Home The Board Time for a CEO MOT

Time for a CEO MOT

by Arthur Kendall

This week has seen talk of making top executives take some sort of hubris test or CEO MOT* as a way of identifying what is the single biggest – yet un-assessed – risk to any business, the over-confidence of the CEO, a trait that can lead to disastrous, unchallenged decisions.

The idea was originally suggested by Chris Wiscarson, head of UK insurer Equitable Life in a Sunday Telegraph Interview. In the interview Wiscarson displays dismay at how the lessons learnt from the collapse of the mutual insurer were ignored in the run up to the banking crisis – by both banks and banking regulators. Factors identified in the detailed report “Did Anyone learn Anything From The Equitable?” by Richard Roberts, professor of contemporary British history at King’s College, London, were – product complexity, business model complexity, insufficient board governance, out-of-control executives and inadequate regulation.

All five factors are painfully familiar in the causes of the banking crisis. The idea of a CEO MOT, which would test an executive’s attitude and behaviour, not simply his or her performance in financial terms, seems so obvious it is amazing no-one has suggested it before. Well, this is not exactly true. Our Applied Corporate Governance approach is based on a Stakeholder Survey (carried out at least once a year) which asks probing questions about the perception of the various stakeholders of the company and, where possible, the board and chief executive. While we haven’t so far included a specific hubris test, perceptions of a growing arrogance in the CEO’s behaviour would be picked up by our survey, especially in interviews with the board and CEO him/herself.

Asking direct questions is an approach favoured by the FT’s Lucy Kellaway (one of my favourite FT commentators), who picked up on the idea of a hubris test and made more specific suggestions on the sort of questions that might be asked, though she suggests it be done by the board and the CEO’s PA (as well as the CEO himself). While we insist it is driven by the Chairman and board, we believe only an independent research firm can be truly effective in identifying such risks and reporting on corporate governance and board effectiveness.

There is a growing call for lessons to be learned but still only limited action. But as more hubristic CEOs are ousted from their jobs and a new generation of leaders takes the reins of large financial institutions, maybe ideas like the CEO MOT and others stand a chance of making it off the pages of journalists, commentators and corporate governance campaigners and into the boardroom.


* MOT refers to the UK’s Ministry of Transport test for vehicles used on public roads.

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